Liquor License Policies Can Boost Real Estate Growth

Winter 2019/2020 Issue
By: Rich Tucker
Many states maintain antiquated laws and regulations regarding the sale and consumption of alcohol, and these outdated measures are hampering development opportunities. Getty Images

NAIOP chapters seek to loosen Prohibition-era restrictions.

It’s a Friday afternoon, and you’re planning to meet up with friends to chat and unwind after a full week of work. Where are you going to go? Chances are to a restaurant or bar where you can have a beer, glass of wine or a mixed drink.

Even in an age when many people are health conscious, alcohol remains a key to bringing people together — especially young adults, the demographic that business owners are trying to attract.

“Restaurants have proven to be desirable anchors for redevelopment projects, magnets for other businesses and an amenity for a population that is dining out more than ever,” notes Michael McGuinness, CEO of NAIOP New Jersey.

However, in his state, there simply aren’t enough liquor licenses available for every establishment that wants one.

Few Licenses in New Jersey

The Garden State’s liquor license laws date back to the Prohibition era; the number of permits was and still is linked to the number of residents within a jurisdiction. Back then, of course, there were fewer people and therefore less need for liquor licenses. Yet even as the state’s population has grown across the decades, the number of licenses in use has declined.

That’s because many of those who hold liquor licenses are not currently using them. These holders treat the license almost as a financial investment, treating it like a stock and possibly selling it after it increases in value. There are roughly 2,000 inactive liquor licenses at any given moment in New Jersey, and this creates scarcity and drives up costs, simply because laws prohibit the sale of liquor licenses beyond municipal borders and limit the number of licenses based on the resident population.

Selling a license to someone who will use it can be lucrative, with the prices reaching six figures.

“For the privilege of serving an alcoholic beverage, you’ve got to come up with a million dollars in some places,” Assemblyman John Burzichelli, D-3rd District, tells NJBIZ. “What chance does the little guy have of going into the business?”

Burzichelli has taken steps to fix the problem by making more licenses available. In a previous legislative session, he introduced a bill that would have created a new type of liquor license. This restricted restaurant license would allow the sale of any alcoholic beverages for consumption on the premises. It would also create restricted beer and wine licenses that would allow the sale of only beer or wine by the bottle or can. These licenses would only be available for restaurants that occupy between 1,500 and 6,000 square feet with a full-service kitchen that covers a minimum of 500 square feet. Fees would be affordable, too, ranging between $1,500 and $10,000.

Municipalities would be allowed to introduce an unlimited number of these licenses. McGuinness supports the measure.

“Safe and affordable places to live with access to a 24/7 live/work/play environment offering transit, recreational facilities, places to congregate, and a variety of culture, dining and drinking establishments are the recipe for success,” he testified before the Assembly. “This bill will help the state deliver these types of locations.”

The bill has passed two Assembly committees and stands ready to be considered by the full Assembly, which will be back in session in January.

“NAIOP is very encouraged by this action,” Anthony Pizzutillo, NAIOP New Jersey’s government affairs consultant, said after the bill was referred to the Assembly Appropriations Committee. “It sends a signal to the market that the Legislature is responding to attitudinal changes and market changes in New Jersey for allowing towns to be creative in attracting young people, millennials and the young labor market to live, work and play in the state.”

The legislation could provide an economic boost across the state.

“Many areas could benefit, such as Fort Monmouth in Eatontown, the Hoffman LaRoche site in Nutley and Clifton, Sanofi campus in Bridgewater, Bell Works in Holmdel, abandoned airports and dozens of other redevelopment sites,” McGuinness notes. “Imagine them becoming cool places where the younger generation would cluster to live. Investors and new businesses would quickly follow as ‘capital chases talent.’”

A Problem in Wisconsin, Too

New Jersey isn’t alone in facing this issue.

Breweries put Milwaukee on the map, but a lack of liquor licenses is a problem in Wisconsin. Similar to New Jersey, the state doles out licenses through a quota system based on the population of a municipality.

“There is a cap on licenses,” NAIOP Wisconsin CEO Jim Villa says. “That’s causing a limitation in development opportunities in places where we have seen a growth in food and beverage components.”

In the previous legislative session, NAIOP lobbied successfully for passage of Assembly Bill 612, which made it easier for municipalities that were not using licenses to sell them to nearby areas that are growing. But the state needs further reform that makes more licenses available overall.

Commercial real estate developers are working to give Americans places to work, live, play and relax. State and local governments can help by improving and modernizing their permitting processes to meet local needs.

Rich Tucker is NAIOP’s director for public policy communications.